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Consider the diagram on the facing page depicting the demand and cost conditions faced by a monopolistically competitive firm. (See page 559.)




25-2. Consider the diagram on the facing page depicting;the demand and cost conditions faced by a monopolistically;competitive firm. (See page 559.);a. What are the total revenues, total costs, and;economic profits experienced by this firm?;b. Is this firm more likely in short- or long-run;equilibrium? Explain.;25-6. Calculate total average costs for the bookstore in;Problem 25-5. Illustrate the stores short-run equilibrium;by plotting demand, marginal revenue;average total costs, and marginal costs. What is its;total profit? (See page 560.);25-8. It is a typical Christmas electronics shopping season;and makers of flat-panel TVs are marketing the latest;available models through their own Web sites as;well as via retailers such as Best Buy and Walmart.;Each manufacturer offers its own unique versions of;flat-panel TVs in differing arrays of shapes and sizes.;As usual, each is hoping to maintain a stream of;economic profits earned since it first introduced;these most recent models late last year or perhaps;just a few months before Christmas. Nevertheless, as;sales figures arrive at the headquarters of companies;such as Dell, Samsung, Sharp, and Sony, it is clear;that most of the companies will end up earning only;a normal rate of return this year. (See page 560.);a. How can makers of flat-panel TVs earn economic;profits during the first few months after;the introduction of new models?;b. What economic forces result in the dissipation;of economic profits earned by manufacturers of;flat-panel TVs?;25-12. Categorize each of the following as an experience;good, a search good, or a credence good or service;and justify your answer. (See page 563.);a. Services of a carpet cleaning company;b. A new cancer treatment;c. Athletic socks;d. A silk necktie;25-16. A firm that sells e-booksbooks in digital form;downloadable from the Internetsells all e-books;relating to do-it-yourself topics (home plumbing;gardening, and the like) at the same price. At present;the company can earn a maximum annual profit of;$25,000 when it sells 10,000 copies within a years;time. The firm incurs a 50-cent expense each time a;consumer downloads a copy, but the company must;spend $100,000 per year developing new editions of;the e-books. The company has determined that it;would earn zero economic profits if price were equal;to average total cost, and in this case it could sell;20,000 copies. Under marginal cost pricing, it could;sell 100,000 copies. (See page 565.);a. In the short run, what is the profit-maximizing;price of e-books relating to do-it-yourself topics?;b. At the profit-maximizing quantity, what is the;average total cost of producing e-books?;26-2. The table below shows recent worldwide market;shares of producers of inkjet printers. (See page;576.);Firm;Brother;Canon;Dell;Epson;Hewlett-Packard;Lexmark;Samsung;Other;Share of Worldwide Market Sales;3%;17;6;18;41;13;1;1;a. In this year, what was the four-firm concentration;ratio in the inkjet-printer industry?;b. In this year, what was the seven-firm concentration;ratio in the inkjet-printer industry?;26-4. What is the value of the Herfindahl-Hirschman;Index for the industry in Problem 26-2? (See;page 577.);26-8. Consider two strategically dependent firms in an;oligopolistic industry, Firm A and Firm B. Firm A;knows that if it offers extended warranties on its;products but Firm B does not, it will earn $6 million;in profits, and Firm B will earn $2 million.;Likewise, Firm B knows that if it offers extended;warranties but Firm A does not, it will earn $6 million;in profits, and Firm A will earn $2 million. The;two firms know that if they both offer extended;warranties on their products, each will earn $3 million;in profits. Finally, the two firms know that if neither;offers extended warranties, each will earn $5;million in profits. (See page 581.);a. Set up a payoff matrix that fits the situation;faced by these two firms.;b. What is the dominant strategy for each firm in;this situation? Explain.;26-10. Explain why network effects can cause the demand;for a product either to expand or to contract relative;to what it would be if there were no network effects.;(See pages 583584.);26-12. Consider the following list, and classify each item;according to the appropriate type of two-sided;marketaudience-making, matchmaking, sharedinput;or transaction-basedand write a one-sentence;answer justifying your classification. (See page 585.;Hint: In some cases, you may wish to check out the;firms Web sites to assist in answering this question.);a.;b.;c.;d.


Paper#18356 | Written in 18-Jul-2015

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